Saudi Arabia's Almarai Company, the Gulf's largest dairy firm by market value, said on Saturday it had offered to take over local Hail Agricultural Development Company (Hadco) through a share-swap deal.

Almarai is offering Hadco's shareholders one new Almarai share for each six shares they hold, it said in a statement posted on the bourse's website.

'The proposed offer represents a 29 percent premium over the closing price of Hadco's shares on November 5,' it said.

Almarai's bid values Hadco at SR703 million ($187.5 million). Almarai will issue 5 million new shares to take control of Hadco's 30 million shares once the proposal obtains all necessary approvals.

Hadco's shares closed on Wednesday at SR18.15 ($4.84), while Alamarai's stock closed at 140.5 riyals. Hadco's board was studying the proposal, the company said in a separate statement.

Almarai's offer represents 13 times Hadco's 2007 earnings and about 11 times its 2008 expected earnings of SR63 million, said Laurent-Patrick Gally of Dubai-based Shuaa Capital.

Hadco owns some 86,500 acres of land north of the capital Riyadh and is involved in the production of various agriculture products such as wheat, corn, olives, dates, grapes.

It also owns poultry and meat processing businesses, Gally said. 'We believe Hadco's potential acquisition would equip Almarai with a more diversified production assets footprint,' Gally wrote in an emailed note.

'Almarai has made no mystery in the past it was eager to enter the poultry business,' he added, noting that a deal may be closed within two months.

'(The takeover) would enable Almarai to acquire a substantial asset base and expertise in the poultry business, without having to set up its own from scratch, which is positive in our view,' he said.

With a capacity to produce 10 million chickens per year, Hadco is the fourth-largest poultry producer in the kingdom.

Almarai's shares fell after the announcement was made while Hadco's shares rose by almost the 10 per cent limit.

Almarai has been diversifying its revenue sources through acquisitions and said it plans to spend SR6 billion in the five years to 2013.

The firm announced in the third quarter two acquisitions of juice and dairy manufacturers in Egypt and Jordan.

Last year, Almarai began consolidating the earnings of the acquisition of Western Bakeries and International Bakery Services Co in 2006. It paid SR709 million in stock for the companies.

The dairy firm is part of a group led by Kuwait's telecom firm Zain that paid $6.1 billion last year for a licence to start Saudi Arabia's third mobile telephone operator, Zain Saudi Arabia.-Reuters